Family Ownership, Board Independence, and R&D Investment

Abstract

Family influence is central in Asian countries; however, little research exists regarding the effects of family ownership and corporate governance on corporate investment decisions. This article examines the relationships among family ownership, board independence, and R&D investment using a sampling of Taiwanese firms. The finding of the negative family ownership—R&D investment relationship suggests that family ownership may discourage risky long-term R&D investment. Such a finding may also suggest that firms with high family ownership may use R&D investment more efficiently and thus need less R&D in relation to firms with low family ownership. In addition, the interaction of family ownership and CEO duality/independent director ratio is negatively/positively related to R&D investment, suggesting that firms with high family ownership may increase R&D investment when the CEO—chair roles are separated or when more independent outsiders are included in the board.